Aditi Nayar

Economy
Chief Economist, Head-Research & Outreach, ICRA

Another pause from the MPC

After the October 2024 policy review, the Monetary Policy Committee (MPC) was faced with a barrage of increasingly unpleasant data. The CPI inflation catapulted to 5.5% in September 2024, and further to 6.2% in October 2024. Soon after that, the GDP growth print for Q2 FY2025 revealed a discomfiting dip to 5.4%. As expected, the optics of the CPI inflation exceeding the upper threshold of the MPC’s medium term target range of 2-6%, did not deem it prudent for the Committee to cut the repo rate in its December 2024 policy review, despite the slowdown in India’s GDP growth. At the same time, in a practical decision to support economic activity, the Reserve Bank of India (RBI) announced that the cash reserve ratio (CRR) is being reduced by 50 bps in two tranches in December 2024 itself, to infuse durable liquidity of Rs. 1.16 lakh crore. Two largely anticipated changes were the revisions in the MPC’s quarterly and annual CPI and GDP forecasts. In line with our own projection, the Committee raised its CPI forecast for FY2025 to 4.8% in the December 2024 policy meeting, from the extant 4.5%. More importantly, it envisions the CPI inflation to print at 4.0% in Q2 FY2026, the elusive midpoint of its medium-term target.

Vinay Kumar G

Construction Sector
Vice President & Sector Head – Corporate Ratings, ICRA

Railway station redevelopment to offer business opportunities worth Rs. 30,000 crore for EPC players over the next two years

ICRA expects business opportunities worth Rs. 30,000 crore to open up for engineering, procurement, and construction entities (EPC) players over the next two years in railway station redevelopment work. A total of 1,318 railway stations by the Indian Railways are being considered for redevelopment under the Amrit Bharat Station Scheme (ABSS). Earlier, the Government of India (GoI) had envisaged majority of the station redevelopment projects under the Public-Private-Partnership (PPP) mode, which accounted for around 12% for the National Monetisation Pipeline (NMP) target. However, with limited participation in the PPP mode owing to restrictions on pricing, market risk related to real estate development and limited track record of PPP projects in railways, the Government reallocated station redevelopment work on the EPC mode in December 2022. To support this, the budgetary allocation increased by more than seven times from Rs. 2159 crore in FY2023 to Rs. 15,511 crore in FY2025 Budget Estimates (BE) and is expected to remain at healthy levels in the medium term.

Girishkumar Kadam

Steel Industry
Senior Vice President & Group Head – Corporate Ratings, ICRA

FY2025 capacity utilisation of domestic steel industry poised to slip below 80% for the first time in four years as cheap imports nibble at market share

Following the post-Covid metals rally, the domestic steel industry was able to achieve the impossible trinity of maintaining above 80% capacity utilisation rates, a strong investment pipeline, and comfortable leverage levels for three years back-to-back between FY2022 and FY2024. However, according to ICRA’s latest note on the steel sector, this trinity is unlikely to sustain going forward as the recent surge in cheap imports have nibbled at the market share of domestic steel companies, leading to pressure on industry’s profit margins, lowered capacity utilisation rates, and steadily raised the leverage levels to support ongoing growth plans.

Sachin Sachdeva

Banking Sector
Vice President & Sector Head – Financial Sector Ratings, ICRA

Indian Banking Sector - Credit growth to remain subdued for FY2026

ICRA has revised its credit growth estimate downwards to 10.5-11.0% for FY2025 from its earlier estimate of 11.6- 12.5% for FY2025. In its recent report, ICRA highlighted that with the banks focusing on reducing their credit-to deposit (CD) ratio and reducing their exposures to unsecured retail and non-banking financial companies (NBFCs), the overall credit growth has moderated in the past few months. Consequently, credit and deposit growth has almost aligned with each other and ICRA expects the trend to continue. Further, for FY2026, credit growth may ease to 9.7-10.3%, weighed down by the persisting high CD ratio and implementation of the proposed changes in the liquidity coverage ratio (LCR) framework.